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Tariffs on Chinese Solar Panels, Weighing Pros and Cons

Last fall, a coalition of solar manufacturers filed a trade complaint with the Department of Commerce and the International Trade Commission alleging that Chinese companies were illegally subsidizing the production of solar panels and dumping them in the US marketplace. A ruling is expected soon from Commerce, perhaps even by early March, that will determine whether additional tariffs or duties should be placed on imported solar panels from China. A recently issued study has added more pressure to an already contentious decision, with findings that suggest up to 60,000 jobs could be lost due to higher costs for solar projects and retaliatory action from China.

Leading the coalition of US manufacturers in the dispute is SolarWorld, an Oregon-based subsidiary that employs approximately 1,000 workers in the state. Their filing contends that China uses upwards of 30 different subsidy programs that places them at a competitive disadvantage. China accounts for roughly 50 percent of the US solar panel market and the Department of Commerce has even stated that it had "reasonable cause to believe or suspect" that the alleged subsidies were inconsistent with World Trade Organization rules. In their complaint, US manufacturers are seeking additional tariff duties between 50 and 250 percent that would be applied retroactively to solar panel import operations. These efforts have drawn support from many members of Congress that believe such actions by the Chinese have unfairly skewed the domestic marketplace for US clean energy manufacturers, citing the data showing imports of solar cells and modules have risen 350 percent from 2008 through 2010.

What seems like an open and shut case for US economic interests, may not be entirely accurate according to a group of solar installation companies called the Coalition for Affordable Solar Energy. Their group estimates that on the whole, they employ roughly 97 percent of the US solar industry (with manufacturing only accounting for 3 percent) and that sparking a trade war with China would delay the planned installation of large-scale solar plants and cut thousands of jobs because of increased project costs. According to a study performed by the Brattle Group, a new 100 percent tariff (roughly mid-range of the tariff request) would eliminate 49,000 US jobs and another 11,000 due to retaliatory actions by China. The study also estimated that additional tariffs would cost consumers between $698 million and $2.6 billion in cost overruns. Their findings were based primarily on the fact that increases in the costs of solar panels to meet would necessarily mean that other spending would be diminished across the economy. For example, the cost of solar panels makes up roughly 25 percent of the cost to install a home system and up to 40 of the cost for a large, utility-scale project. Lower prices for solar cells means additional savings that could be passed onto consumers.

SolarWorld issued a statement disagreeing with study's findings, calling the tariff impacts "inflated" and in their opinion ignores alleged illegality in Chinese trade practices. What is certain, however, is this debate adds new complexities for the solar industry as a whole during a time when it is competing with record-low natural gas prices and the potential loss of federal production tax incentives.